Observations of the legal scene from the Cornhusker State, home of Roscoe Pound and Justice Clarence Thomas' in-laws, and beyond.

Saturday, May 24, 2008

Follow up: Referee hearing discipline case against Kearney attorney William Orr recommends public reprimand over failed coffee shop franchising venture. Kearney Hub. Kearney attorney Jeff Orr should be publicly reprimanded for violations he committed while representing Barista's Daily Grind, an Omaha attorney has recommended to the Nebraska Supreme Court. Waldine Olson, who is acting as referee in Orr's disciplinary proceedings, has ruled that Orr violated four of 13 ethical standards and provisions listed in the State Bar Association's Code of Professional Responsibility and Rules of Professional Conduct. (Click here to view Referee Waldine Olson’s 36-page referee’s report in the Jeff Orr discipline case. The Supreme Court case - filed against Orr in August 2007 by the Bar Association - involves Orr's work in drafting a franchise agreement and disclosure statement for Kearney coffee company Barista's and its owners, Steve Sickler and Cathy Mettenbrink.
Sickler and Mettenbrink blame Orr's legal work for the failure of their franchised business last year.
Olson recommended a public reprimand for Orr instead of probation or suspension in a referee's report filed May 7.
Olson said Orr did not "knowingly" or "intentionally" engage in conduct that involved "dishonesty, fraud, deceit or misrepresentation."
The referee said Barista's suffered "severe" consequences as a result of Orr's actions.
"Although the exact nature and extent of the harm suffered by the clients was not addressed in detail, the evidence is clear and convincing that the consequences to the client were serious," Olson said.
However, Olson said the Barista's case was an "isolated occurrence as opposed to a recurring pattern of misconduct" by Orr.
The referee said Orr practiced law more than 40 years with no previous complaints. "The numerous letters from clients, business and community leaders, and members of the bar speak to his good standing and his reputation as a competent and ethical practitioner," Olson said.
Orr's community service, including membership on the Supreme Court Task Force on Gender Fairness, also played a role in the disciplinary recommendation, the referee said.
Following a March hearing, Olson filed a 36-page report May 7 that cleared Orr of nine misconduct allegations and found him in violation of four others.
Olson said Orr took on the Barista's case knowing he was not competent to handle the work.
"Not only had he never undertaken such a task previously, but also he was warned by an intellectual properties lawyer, whom he respected, that franchise law is 'pretty specialized,'" Olson said of Orr.
In 2002, Sickler and Mettenbrink hired Orr to assist them in franchising their coffee shop concept. Orr told Sickler and Mettenbrink that he had experience in franchising businesses, Supreme Court records show.
In March, Orr testified that he had experience in reading and reviewing franchise agreements and disclosure statements for companies such as Wendy's, Quizno's, Dairy Queen, McDonald's, Baskin-Robbins and Ford. However, Orr said during the hearing that he had never drafted a franchise agreement.
In drafting Barista's franchise agreement, Orr said he relied heavily on a Quizno's agreement he had worked on previously. Orr said he did not research Nebraska law when he drafted Barista's agreement.
"... Although he knew that certain aspects of franchising were governed by the Federal Trade Commission, he did not adequately prepare himself for the task," Olson said of Orr.
Supreme Court documents show Kearney attorney Bradley Holbrook helped Orr get a second opinion on the Barista's documents from Omaha attorneys Robert Kirby and Gary Batenhorst. The Omaha attorneys told Orr and Holbrook the disclosure statement did not comply with FTC rules. Batenhorst characterized deficiencies in the disclosure statements as "major," court documents said.
In his recommendation to the Supreme Court, Olson said Orr attempted to correct deficiencies in the disclosure statement and there was no evidence that Orr attempted to conceal his errors.
"Orr disclosed to the client that the documents he had drafted would require considerable changes and they could not be used to sell additional franchises until the changes had been made," Olson said. "The evidence suggests a good faith, although misguided, attempt to resolve the problem."
Orr has practiced law in Kearney since 1967 and is a partner and shareholder of Jacobsen, Orr, Nelson & Lindstrom P.C.
Barista's closed its two Kearney locations at 4402 Second Ave. and 2400 Central Ave. last summer after Sickler and Mettenbrink defaulted on loan payments and lost ownership of their properties to Kearney State Bank & Trust Co. in a foreclosure.
Before learning that their disclosure statement did not comply with FTC rules, Barista's sold 21 franchises between 2003 and 2006. Barista's Daily Grind currently operates in west Kearney under new ownership.
The Supreme Court will decide whether to accept Olson's recommendation. Public reprimands can take various forms, including a press release to the media.